Retailer says it offered $50 million in low-cost loans to improve safety conditions, but no one wanted the money. The factories claim to not know about it.

Bangladeshi civilian volunteers assist in rescue operations after the collapse of Rana Plaza on the outskirts of Dhaka in April. After more than 1,100 garment workers were killed in the factory collapse, Walmart announced a $50-million fund for factory owners to improve safety conditions.

The world’s biggest retailer couldn’t solve the problems of the garment sector in Bangladesh on its own, but it figured $50 million worth of low-cost loans was a good start.

After 1,129 garment workers were killed in the Rana Plaza factory collapse, Walmart announced a $50-million fund for factory owners during an August conference call with investors. Walmart said owners could draw low-interest loans from the fund and use the money to improve structural, electrical and fire safety systems in their factories.

But even as Walmart won public goodwill with its announcement, four garment suppliers in Bangladesh who provide clothing to Walmart told the Star that the retailer never mentioned any such loan offering.

“Walmart has not offered any loan, but certainly it would be a welcome step,” said Itemad Ud-Daulah, managing director of Dird Garments, which makes blue jeans for Walmart in two factories near Dhaka and employs 10,000 workers. “Low-cost loans would create a lot of goodwill.”

The Star provided Walmart with the names of the factory officials who said they were never offered loans. “We cannot speculate on what was said by individual factory owners,” Walmart spokeswoman Susan Schutta wrote in an emailed statement.

Walmart says its loan offer was met with a “no thanks.”

“No one has called on us, no one has asked for (a loan),” said Jay Jorgensen, Wal-Mart’s chief compliance officer. “What that says is at least the factories Walmart is in, they are among the better factories, the more capitalized factories. They haven’t needed it.”

Last week, Walmart released a list of 75 factories in Bangladesh that it has hired to make clothes. It said about 15 per cent of those factories failed the initial round of safety inspections following the Rana Plaza disaster.

Walmart executives also told the Star that their high-profile loan offering may have fizzled because repairs to factories in Bangladesh, where banks charge more than 15 per cent interest for loans, don’t cost as much as they might in more developed countries.

In one case, the removal of an unauthorized factory floor to meet Wal-Mart’s standards cost just $8,000, something that “was within the capacity of the factory to pay for,” said Jan Saumweber, Walmart’s head of ethical sourcing.

“We heard about the very high interest rates in Bangladesh and how that can be a barrier to factories getting access to capital,” Saumweber said. “We made that fund available, yet when we see the magnitude of what actually needs to be done, sometimes it’s just not that expensive to meet our standards.”

Walmart’s claim that its loan fund isn’t needed by factory owners is drawing scorn from labour rights activists close to the Accord on Fire and Building Safety in Bangladesh, a group that includes many European retailers and Canada’s Loblaw. The accord’s members have agreed to be legally obligated to make garment factories in Bangladesh safer.

Scott Nova, who is on an accord working group and is chief executive of the Workers Rights Consortium, a watchdog group that inspects factories in Bangladesh, said Walmart’s claim that its money isn’t needed is “comical.”

“Nobody wants any of Walmart’s money because all of the factories are perfectly happy to pay for this themselves and have no desire to have low-cost financing to pay for it?” Nova said. “It’s completely ridiculous.”

Days after the accord was announced in July, a rival group of mostly U.S. retailers that includes Walmart and The Gap — a group known as the Alliance for Bangladesh Worker Safety — was also announced.

The four months since the groups were unveiled have been marked by bickering between the two.

Officials with the Loblaw group charge the American-led initiative is piggybacking on its efforts. Workers rights activists made that claim during a closed-door meeting on Sept. 23 with officials from the Office of the U.S. Trade Representative, alliance president Jeffrey Krilla, the U.S. Department of Labour, and Jose Fernandez, assistant U.S. secretary of state for economic affairs.

During that meeting in Washington, which was an attempt to bring the two rival groups closer together, workers rights activists close to the accord repeatedly demanded that the alliance contribute money to factory safety upgrades that have already begun. Those demands were ignored by the alliance, according to two people with ties to the accord who attended the meeting.

One case that rankles accord members involves a factory called Liberty Fashions on the outskirts of Dhaka, where safety inspectors found structural flaws similar to the cracks that were detected in the supporting walls at Rana Plaza.

While the owner of Liberty Fashions first insisted his building would “stand for 100 years,” according to a Bangladesh union activist who reviewed the inspection report, the owner subsequently agreed to close down for several weeks for repairs.

British retailers Primark and Tesco, both members of the accord, have already spent more than $200,000 to compensate sidelined workers and for repairs at the factory. Yet Walmart and Jordache Jeans, members of the alliance that also have hired the factory for work, refused to give any cash toward repairs and worker compensation, sources told the Star.

Meanwhile, Walmart’s Jorgensen said the retailer has not set the interest rate for the Bangladesh low-cost loan fund because the company would first need to negotiate terms with the country’s central bank.

Nova said that claim is questionable. “How can Walmart say that the factories weren’t interested in the loan when they never offered the basic information the factories would need to know?” Nova said.

While Nova said it would help to review the emails between Walmart and the factory owners, in which the retailer builds awareness for its loans program, Schutta said the program was advertised only through phone calls and factory visits.

AKM Sanaul Haque, managing director of Claxton Apparels and Textiles, which has sold sweaters to Walmart for six years and does about $1 million in annual sales, says Walmart never offered him a loan for safety improvements.

“They should, at less than 5 per cent interest,” Haque said.

Mahmud Hasan Khan, owner of Arunima Apparels in Bangladesh, a Walmart supplier of ladies shirts for more than 10 years, says he has spent $50,000 on safety improvements so far but has never been offered a loan for those efforts.

Nazrul Islam, managing director of Arefin Textiles, said he, too, would like a loan but has not been offered one.

“How can we achieve this loan?” Islam wrote in a text message to the Star following a phone interview.

Several workers rights activists said they were also skeptical of Walmart’s claims that no factory owners wanted the low-cost loans because the company had previously refused to pay for factory improvements.

During a meeting in Dhaka in April 2011, held after several apparel factory fires the previous winter killed dozens of workers, Sridevi Kalavakolanu, a Walmart director of ethical sourcing, said Walmart would not share the cost of making factory improvements, according to the meeting minutes obtained by the Star. Kalavakolanu and an official from The Gap said proposed improvements in electrical and fire safety would be too expensive.

“Specifically to the issue of any corrections on electrical and fire safety, we are talking about 4,500 factories and in most cases very extensive and costly modifications would need to be undertaken,” Kalavakolanu said, according to the minutes. “It is not financially feasible for the brands to make such investments.”

Walmart has said Kalavakolanu’s comments were taken out of context. “It is not the responsibility of retailers and brands to make structural changes to independently owned factories that agree to manufacture merchandise,” Schutta wrote.

Michael Bride, who helped negotiate terms of the accord and is an executive with the United Food and Commercial Workers International Union, said Saumweber’s claim that a factory renovation might cost as little as $8,000 is misleading.

“This is the Walmart modus operandi,” Bride said. “They use the exception to prove the rule. We saw the same thing in India when Walmart wanted to get access to that market and were saying how good they were for local farmers. They claimed to be helping 100 Indian farmers with sustainable farming, in a country of 1.2 billion.”

Daulah, the managing director of Dird Garments, agreed with Bride.

He said he would have to spend at least $750,000 to install new sprinkler systems in his two factories and is also grappling with having to install fire-plating on the columns of his factories’ steel-plated frames to make them more fire safe. He hasn’t priced that expense yet.

“We have talked to our European customers and told them about our issue and they said they will participate,” Daulah said. “Walmart should come forward and help.”